We talked about some old times.

In 1921 we had a severe depression; it was over in one year. A little bit later in the 30s we had another one but then the government decided to do all these things, bail everybody out. Exactly what we’re doing now and it prolonged the correction.

The implication is that in 1921 the government didn’t “do all these things”. But of course the government did adopt policies to restrict trade and immigration.

Interestingly, two of the first Hoover administration responses in 1930 were to restrict trade and immigration.

I think the lesson one would draw here is that policymakers, seeing that restricting trade and immigration went along with a swift end to the 1921 recession, tried them again in 1930. But they didn’t work. I don’t see any reason to conclude that the government opted not to intervene in 1921 and to intervene in 1930.

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13 comments

I don’t know about trade, but I expect that Paul would be quite happy if we moved to restrict immigration again! (In fact, there are a few immigration restrictions in some of the bills, limiting the ability of banks getting bailout money and the like to hire H-1B immigrants. I’m not very keen on that, but it’s not the worst thing that could be done.)

I don’t see any reason to conclude that the government opted not to intervene in 1921 and to intervene in 1930.

It’s not just that the government opted to intervene; it’s that the government opted to intervene by doing all these things like building the NAFTA superhighway on secret orders from the Council on Foreign Relations in order to undermine the gold standard.

This sentence seems self-contradictory to me. Isn’t the duration of a depression one of the measures of its severity? ISTM that a large but short-lived reduction in economic output (or employment, or whatever other metric you want to use) should be called something else, because confusing it with a depression is, well, confusing.